Kerry Group sees 17.5% drop in group trading profit in first half of 2020

Kerry Group has reported a reduction of 17.5% in group trading profit to €315.9 million for the first six months of 2020, compared to €382.9 million recorded for the same time-frame in 2019.

In its interim management report for 2020, the group blamed an unprecedented first half-year due to Covid-19 and its impact, but said that business recovered well across the second quarter.

Group Performance

The group reported revenue of €3.4 billion decreased by 4.3% versus the same period last year, reflecting a volume reduction of 6.0%, increased pricing of 0.4%, contribution from acquisitions of 1.2%, and a favourable translation currency impact of 0.1%, according to Kerry Group’s interim report.

Kerry Group reported trading profit of €316 million, with trading profit margin decreasing by 140 basis points (bps) to 9.3%.

This, the food giant says, is primarily due to the significant operating deleverage impact resulting from the sharp decline in food-service orders once lockdown measures were introduced globally, with additional Covid-19 related costs being partially offset by cost mitigation actions.

Constant currency adjusted earnings per share decreased by 19.8% to 132.1c, which compares to a 2019 currency adjusted equivalent of 164.7c. Basic earnings per share decreased by 11.1% to 120.4c which compares to 135.5c in the first half of last year.

The interim dividend of 25.9c per share – compared to a 2019 equivalent of 23.5c – reflects an increase from the prior year interim dividend, Kerry noted. The group achieved free cash flow of €107 million in the period, down well on €195 million from the same time period last year.

On a reported basis, group revenue decreased by 4.3% to €3.4 billion, including a volume decrease of 6.0%, positive pricing of 0.4%, a positive translation currency impact of 0.1% and contribution from business acquisitions of 1.2%.

Divisions

In Taste & Nutrition, reported revenue decreased by 4.0% to €2.8 billion, down marginally on the 2019 equivalent figure of €2.9 billion, including a volume decrease of 5.6%, positive pricing of 0.1%, a positive translation currency impact of 0.1% and contribution from business acquisitions of 1.4%.

In Consumer Foods, reported revenue decreased by 6.2% to €647 million, compared to the 2019 equivalent figure of €689 million, including a volume decrease of 7.8%, positive pricing of 1.7% and an adverse transaction currency impact of 0.1%.

Excluding the impact of the ready meals contract exit, divisional volumes would have decreased by 0.7%.

Trading Profit and Margin

Group trading profit decreased by 17.5% to €315.9 million, down from the 2019 equivalent figure of €382.9 million.

Group trading profit margin decreased by 140 basis points to 9.3%, reflecting significant operating deleverage and Covid-19 related costs partially offset by cost mitigation actions, negative net pricing and a benefit from net operational efficiencies.

Trading profit margin in Taste & Nutrition decreased by 170 basis points to 11.6%, “reflecting significant operating deleverage and Covid-19 related costs partially offset by cost mitigation actions, and a benefit from net operational efficiencies”, the group says.

Trading profit margin in Consumer Foods was maintained at 7.0%, as efficiencies delivered from the 2019 Realignment Programme were offset by net operating deleverage/portfolio mix, net Covid-19 related costs partially offset by cost mitigation actions, and negative net pricing in a challenging market.

‘Unprecedented period’

Commenting, Kerry Group CEO Edmond Scanlon said: “The first half of 2020 has been an unprecedented period due to the Covid-19 pandemic, and I am immensely proud of the tremendous efforts of our people in supporting our customers and local communities throughout this period.

We had a strong start to the year, prior to restrictions on movement impacting business performance as we moved through the first quarter.

As anticipated, we have seen a significant impact on our Taste & Nutrition business – particularly our food-service channel, where the impact was most pronounced in April, with the channel recovering well since then.

“Performance in our retail channel improved in the second quarter, primarily through increased consumer demand for authentic cooking, plant-based offerings and health and wellness products.

“In spite of the challenges arising from Covid-19, we continued to make good progress on a number of fronts aligned to our key strategic priorities.

“Our global operations and supply chain continue to demonstrate resilience and engagement with our customers has been overwhelmingly positive, which gives us confidence in the trajectory of business recovery,” Scanlon concluded.